Which of the Following Is the Fed's Best Strategy for Dealing

question 16

Multiple Choice

Which of the following is the Fed's best strategy for dealing with demand shocks?

• A) Maintain a money supply target
• B) Decrease the money supply
• C) Maintain a passive monetary policy
• D) Neutralize the impact with an increase in the money supply
• E) Increase the interest rate.

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Definitions:

General Fund

A main operating fund in governmental accounting, covering most basic services and activities.

Direct Increase

An increase in the value or quantity of an asset or account directly due to additional investments or improvements, rather than through earnings.

Capital Assets

Long-term assets acquired for use in business operations, expected to be used or held for more than one financial period.

Capitalized

Costs that are recognized as part of an asset on the balance sheet rather than being expensed, often related to the acquisition or construction of a long-term asset.